Selling your home can be one of the biggest financial decisions you make. But what if your current mortgage rate is sky-high or you’re strapped for cash before listing? You might be asking yourself: Should I refinance before selling?

It depends. If you’re planning to hold onto the property for at least 12–24 months, refinancing could lower your payments, free up equity, or allow for renovations to boost resale value. But if a sale is imminent, the closing costs could outweigh the benefits.

Let’s unpack this so you can make a confident, well-informed decision.

Key Takeaways:

• Refinancing before selling can help reduce monthly payments and tap into equity, but timing is critical.
• It may not make sense if you plan to sell within a year due to closing costs.
• Learn the math behind break-even points, rate drops, and home appreciation.
• Understand how your credit, equity position, and market conditions play into the decision.
• Know your refinance options and how to avoid costly mistakes.

When Does It Make Sense to Refinance Before Selling?

Refinancing before a sale is all about timing. Here’s when it might actually benefit you:

1. You Plan to Sell in 1–2 Years, Not Right Away

• A lower interest rate can reduce your monthly payments, giving you short-term relief.
• The key is hitting the break-even point—the time it takes to recoup closing costs through savings.

2. You Want to Tap Into Home Equity (Cash-Out Refinance)

• Cash from a refinance can be used for:
  
  • Renovations that increase resale value
  • Paying down debt to improve your DTI (Debt-to-Income ratio)
  • Covering moving or staging costs

3. You’re Looking to Remove a Co-Borrower or Change Loan Terms

• Divorce, estate planning, or changing your loan type (e.g., ARM to fixed-rate) may warrant a refinance.

Pro Tip:

If you’re using the refinance funds to increase the home’s market value, it can be a smart move. But make sure your updates bring a return on investment (ROI). Think kitchen upgrades, new roofing, not a luxury pool.

When Refinancing Before Selling Doesn’t Make Sense?

1. You’re Planning to Sell in the Next 6–12 Months

• Closing costs can run 2–6% of your loan amount.
• You may not stay in the home long enough to recoup those fees.

2. Your Credit Score or Home Equity Is Low

• You could end up with a higher rate or less favorable terms.
• Lenders typically want at least 20% equity for the best refinance options.

3. You Already Have a Competitive Mortgage Rate

• If your current rate is close to today’s average, refinancing may not save enough to justify the effort.

How to Calculate Your Break-Even Point?

Formula:
Break−EvenTime(inmonths)=ClosingCosts÷MonthlySavingsBreak-Even Time (in months) = Closing Costs ÷ Monthly Savings

Example:

• Refinance saves you $200/month
• Closing costs are $4,000
• Break-even = 20 months

If you're selling in less than 20 months, it’s probably not worth it.

Use a reliable refinance calculator to crunch the numbers.

Compliance Reminder & Disclosures

• This content is for educational purposes and should not be considered financial advice.
• Mortgage terms, rates, and eligibility vary by borrower.
• Licensing Disclosure: Be My Neighbor Mortgage, NMLS #1743790.
• Always compare offers from multiple lenders.
• For rate and APR disclosures, consult trusted sources like Freddie Mac or Consumer Finance.

Conclusion: Should You Refinance Before Selling?

If your timeline to sell is over a year and you can secure a lower rate or meaningful equity, refinancing could be a savvy move. But if a sale is on the near horizon, tread carefully, costs may eat into your profits.

Platforms like realpha make the process of buying or selling seamless and commission-free, while Be My Neighbor connects borrowers with competitive refinance options and transparent guidance.

Bottom line: Know your numbers, know your timeline, and choose partners that keep your best financial outcome front and center.

FAQs

Should I refinance if I plan to sell my home soon?

Only if you plan to hold onto the property long enough to recoup closing costs, typically at least 12–24 months.

What is a cash-out refinance, and is it smart before selling?

It allows you to tap into your home equity for cash. It can be smart if you use that money to increase the value of your home before selling.

Do I need good credit to refinance?

Yes. Better credit usually equals better rates and lower fees. Aim for a credit score above 680 to qualify for the best terms.

What are the closing costs on a refinance?

Generally, 2–6% of the loan amount. Always calculate your break-even timeline before committing.

Is it better to sell and then buy again or refinance now?

It depends on your long-term goals. Refinancing now can help with short-term savings, but if you're upsizing or relocating, it may be better to focus on selling first.

Disclosures:

• Be My Neighbor Mortgage (BMN), NMLS #1743790, is a licensed mortgage lender.
• This article does not guarantee loan approval or rate eligibility.
• Realpha and BMN operate independently, though affiliated.
• Commission-free services refer to realpha’s buyer-side services only and may not apply in all markets.

All lending decisions are subject to underwriting approval and borrower qualifications.